When prosecutors in New York can finally investigate former President Donald J. Trump’s federal tax returns, they will discover a true guide to getting rich while losing millions of dollars and paying little to no income tax.
However, whether they find evidence of crime will also depend on other information not found in the actual reports.
The United States Supreme Court on Monday paved the way for Manhattan district attorney Cyrus R. Vance Jr. to obtain eight years of federal income tax returns from Mr. Trump and other data from his accountants. The decision ended a protracted legal battle over prosecutors’ access to the information.
The New York Times gave more or less a taste of what awaits Mr. Vance last year, when it collected and analyzed decades of income tax data for Mr. Trump and his companies. The tax data offers an unprecedented and highly detailed look at the Byzantine world of Mr. Trump’s finances, which he simultaneously boasted and tried to keep secret for years.
The Times’ investigation found that the former president reported hundreds of millions of dollars in business losses, had to pay no federal income tax for years, and faced an Internal Revenue Service audit of a $ 72.9 million tax refund that he spent ten years. ago.
Among other things, the data showed that Mr. Trump had paid only $ 750 in federal income tax in his first year as president and no income tax at all in 10 of the previous 15 years. They also showed that between 2010 and 2018 he had written off $ 26 million in “consultancy fees” as operating expenses, some of which appear to have been paid to his older daughter, Ivanka Trump, while she was a paid employee of the Trump Organization.
The legitimacy of the fees, which lowered Mr. Trump’s taxable income, has since become a subject of Mr. Vance’s investigation, as has a separate civil investigation by Letitia James, the Attorney General of New York. Mrs. James and Mr. Vance are Democrats, and Mr. Trump has tried to portray the multiple investigations as politically motivated, while denying any wrongdoing.
Mr. Vance’s office has been issuing subpoenas and interviewing in recent months investigating a variety of financial matters, including whether the Trump Organization misrepresented the value of assets in obtaining loans or paying real estate taxes, as well as the payment of $ 130,000 in hush money during the 2016 campaign for Stephanie Clifford, the adult film actress whose stage name is Stormy Daniels. Those interviewed included employees of Deutsche Bank, one of Mr. Trump’s largest lenders.
Despite all their disclosures, Mr. Trump’s tax records are also notable for what they fail to reveal, including any new details about the payment to Ms. Clifford, which was the first focus of Mr. Vance’s investigation when it began two years ago.
The tax returns represent self-reported records of income and expenses, and often lack the specificity required to know, for example, whether legal fees associated with hush money payments were claimed as tax write-off, or if money from Russia ever moved through Mr. Trump’s bank accounts. . The lack of that level of detail underscores the potential value of other documents that Mr. Vance was given access to with Monday’s Supreme Court decision.
In addition to the tax returns, Mr. Trump’s accountants, Mazars USA, must also provide business documents on which those returns are based and communications with the Trump organization. Such material could provide important context and background for decisions made by Mr. Trump or his accountants in preparing for tax returns.
John D. Fort, a former chief of the IRS criminal investigation department, said tax returns were a useful tool for discovering leads, but could only be fully understood with additional financial information obtained elsewhere.
“It is a very important personal financial document, but it is only one piece of the puzzle,” said Mr. Fort, a CPA and the research director at Kostelanetz & Fink in Washington. “What you find in the declaration must be followed by interviews and summonses.”
Still, the Times’ investigation into Mr. Trump’s earnings revealed a number of misleading claims and falsehoods he has propagated about his wealth and business acumen.
Numerous Mr. Trump’s claims to generous philanthropy fell apart after examining his tax returns, raising questions about both the amount of certain donations and the general nature of his tax-deductible endowment. For example, $ 119.3 million of the roughly $ 130 million in charity rebates he has claimed since 2005 turned out to be the estimated value of pledges not to develop real estate, sometimes after a planned project failed.
At least two of those land charities deductions, one related to a Los Angeles golf course and the other a Westchester estate called Seven Springs, are known to be part of Ms. James’s civil investigation, which is investigating or supporting valuations tax write-offs were high.
More broadly, the tax data showed how the public disclosures he filed as a candidate and then as president distorted his overall finances by reporting glowing numbers for his golf courses, hotels and other businesses based on gross income they collected every year. . The actual bottom line, after losses and costs, was much more bleak: In 2018, while Mr. Trump’s public filings showed $ 434.9 million in revenue, his tax returns reported a total of $ 47.4 million in losses.
And such dire numbers were no anomaly. Mr. Trump’s many golf courses, a core component of his business empire, reported a loss of $ 315.6 million between 2000 and 2018, while revenues from licensing his name to hotels and resorts had nearly dried up by the time he entered the White House. In addition, Mr. Trump has hundreds of millions of dollars in loans, much of which he personally guaranteed, that will expire in the coming years.
The Times’s investigation also revealed that he is facing a potentially devastating IRS audit, targeting the massive refund he claimed in 2010, which covered all federal income taxes he paid from 2005 to 2008, plus interest. Mr. Trump repeatedly cited the ongoing audit as the reason he could not release his tax returns, after initially saying he would, even though nothing about the audit process prevented him from doing so.
If an IRS ruling eventually went against him, Mr. Trump could be forced to repay more than $ 100 million, taking into account interest and possible fines, in addition to about $ 21.2 million in state and local tax refunds. were based on figures in his federal filings.
Russ Buettner and Susanne Craig contributed reporting.